Public Bill Committee

[Hywel Williams in the Chair]

Hywel Williams: Before we begin, I have a few announcements. Please will hon. Members ensure that electronic devices are turned off or switched to silent during Committee sittings? As a general rule, my fellow Chair and I do not intend to select starred amendments, which are those that were not tabled with adequate notice. The required notice period for a Public Bill Committee amendment is three working days, so amendments should be tabled by the rise of the House on Monday for consideration on Thursday and by the rise of the House on Thursday for consideration on the following Tuesday. This Thursday is therefore the deadline for amendments for the first day of line-by-line consideration of the Bill on Tuesday next week. The Public Bill Office will accept amendments until 4.30 pm, notwithstanding the recess.
Not everyone is familiar with the process of taking oral evidence in Public Bill Committees, so it may be of help if I briefly explain the procedure. The Committee will first be asked to consider the programme motion, on which debate is limited to half an hour. We will then proceed to a motion to report written evidence and then a motion to permit the Committee to deliberate in private in advance of oral evidence, which I hope we can take formally. Assuming that the second of those motions has been agreed to, the Committee will then sit in private, at which point non-members of the Committee will be asked to leave the room for a short while. Once the Committee has deliberated in private, the witnesses and members of the public will be invited back into the room and oral evidence will begin.

Karen Bradley: I beg to move,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 12 November) meet—
(a) at 2.30 pm on Tuesday 12 November;
(b) at 9.25 am and 2.00 pm on Tuesday 19 November;
(2) the Committee shall hear oral evidence on Tuesday 12 November in accordance with the following Table:

TABLE

Time

Witness
Until no later than 10.15 am
Remote Gambling Association; Gibraltar Betting and Gaming Association; Sport Rights Owners Coalition
Until no later than 11.25 am
British Horseracing Authority; Sports Betting Group; National Casino Forum
Until no later than 3.15 pm
Salvation Army; Quaker Action on Alcohol and Drugs; Professor Jim Orford, Emeritus Professor of Clinical and Community Psychology, University of Birmingham; CARE
Until no later than 3.45 pm
Financial Conduct Authority
Until no later than 4.30 pm
Gambling Commission; Department for Culture, Media and Sport
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 6.00 pm on Tuesday 19 November.

Clive Efford: While the Opposition support the programme motion, I want to put on the record our disappointment at the short time that we had to call witnesses to give evidence. When we discussed the motion last night, it was pointed out that the Government had made a drafting error. We accept that it was an error, but its unfortunate consequence was that we had only one week’s notice to call witnesses, because we were under the impression that there was to be no oral evidence, which has meant that some of our witnesses have not been able to make it here with such short notice.

Helen Grant: Mr Williams, it is a pleasure to speak under your chairmanship today. I will briefly respond to the shadow Minister’s remarks. I do not accept what he says and I want to set out the chronology. I am surprised that he has indicated that he has not had enough time to prepare the list of witnesses and to get everyone he wanted here.
The Bill has existed in the form that the Committee will consider today since May 2013. It was also subject to extensive pre-legislative scrutiny by the Select Committee on Culture, Media and Sport. Unofficial conversations then took place between the Government Whip and Opposition Whip on Wednesday 30 October when it was agreed that there would be two evidence sittings and two scrutiny sittings. That was nearly two weeks prior to today’s hearing, so I suggest that the shadow Minister was on notice then that oral evidence was to be heard.
At Second Reading, which was on 5 November, the official Opposition chose not to vote against the programme motion or the motion to extend the Committee when the error was discovered. That is nothing to do with the time element for getting witnesses to today’s sitting and the two should not be conflated. The Opposition have had plenty of time to voice concerns about the timings and it is a shame that the issue was raised with me for the first time last night.
Notwithstanding that, I note that we shall be hearing from a very, very impressive list of witnesses today. In the knowledge that those who were unable to attend will be able to submit written evidence, and considering the extensive pre-legislative scrutiny, I hope the hon. Gentleman does not intend to delay this short but important and much needed Bill any further.

Clive Efford: My only comment on the chronology that the Minister read out is about the omission of the fact that the error in the drafting was not corrected until 5 November. People were left with the impression that there was no evidence session, which is why some people found it difficult to be here at short notice. The Opposition were not slow in drawing up our list of witnesses—we responded almost immediately once we were aware that we needed to—but unfortunately, in the short time that was left because of the confusion, they were not able to re-arrange their diaries to be here. That is a shame. Given that it has taken four years since my hon. Friend the Member for Bradford South initiated the consultation on this subject when he was sports Minister, it is disappointing that we now seem to be taking undue haste when we could have been taking evidence from experts who would have better informed the Committee about the Bill.

Question put and agreed to.

Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Karen Bradley.)

Hywel Williams: Copies of the written evidence that the Committee receives will be made available in the Committee Room.
Written evidence to be reported to the House
GB 01 British Horseracing Authority
GB 02 Betfair
GB 03 English Cricket Board
GB 04 Remote Gambling Association
GB 05 Sports Betting Group
GB 06 The Rank Group
GB 07 National Casino Forum
GB 08 Sports Rights Owners Coalition (SROC)

Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Karen Bradley.)

The Committee deliberated in private.

Examination of Witnesses

Clive Hawkswood, Peter Howitt and Nic Coward gave evidence.

Hywel Williams: Good morning and welcome to the Committee. We will now hear oral evidence from the Remote Gambling Association, the Gibraltar Betting and Gaming Association and the Sports Rights Owners Coalition. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme motion that the Committee has just agreed. I will have to interrupt mid-sentence if a session is continuing at its scheduled finish time. Members should declare any interest before the start of each panel to which that interest is relevant. May I ask the first witnesses to introduce themselves?

Clive Hawkswood:  I am Clive Hawkswood, and I am chief executive of the Remote Gambling Association.

Peter Howitt:  I am Peter Howitt, and I am the chief executive of the Gibraltar Betting and Gaming Association.

Nic Coward:  Good morning. I am Nic Coward, the general secretary of the Premier League. Perhaps more importantly in the context of this discussion, I was formerly the chairman of the Sports Rights Owners Coalition and of the British Horseracing Authority.

Hywel Williams: Thank you, and welcome to the Committee.

2 Clive Efford: Could you all give us an indication of what you understand to be a light-touch regulatory regime, and what you think the benefits of such a regime are?

Clive Hawkswood:  I will begin. I do not think that we are necessarily in favour of a light touch; we are talking about an appropriate level of regulation. That is what we aim for in every jurisdiction. We believe that, on the face of it, the Gambling Commission has a proportionate level of regulation at the moment. There are some outstanding issues, but we hope that they will be resolved before the new licences are issued.

Peter Howitt:  For ourselves, if you look at the wider market in financial services, the idea of light-touch regulation per se needs careful thought. The important thing, as Clive says, is effective regulation and licensing models that ensure that people within the regulated sector are not disadvantaged by people who do not play the regulated game.

Nic Coward:  I would say that it was true of any regulated sector that there need to be clear regulations in place so that the sector and stakeholders with an interest in the sector understand what they are; that they are monitored; that there is an effective compliance regime; and that there are real enforcement provisions behind it.

3 Clive Efford: Could you say what level of enforcement you would expect to see behind it? For instance, would you expect to see financial blocking or shutting down of IP addresses? That is a general question to all of you.

Clive Hawkswood:  I think the Government’s position at the moment is that they will begin with an advertising ban, and they seem to believe that that will succeed in itself. We would be very doubtful about that. The other obvious alternatives that other countries have looked at are ISP blocking and financial transaction blocking. We have to say that our experience in lots of other jurisdictions is that they are not wildly successful. The key seems to be, in every one of those jurisdictions, not so much whether offshore or non-licensed operators can access the market but whether there is demand for their services. We think the key to successful blocking is providing a regime and a service to customers where they will not feel the need to go outside the licensed market for those services.

Peter Howitt:  We have seen member states in Europe try different measures, including payment blocking and ISP blocking. We have seen America use an approach involving payments. The evidence is incontrovertible that none of those measures, in themselves or in combination, achieve the effect of keeping local consumers away from unregulated operators. Like Clive, our experience is that the best thing to ensure that people stay within a regulated environment is to make that environment commercially attractive and sensible. That way we can achieve the aim of protecting consumers without making supplies by unlicensed operators so attractive that consumers find it easy and are willing to go elsewhere.

Nic Coward:  Focusing on the interests of the members of SROC and therefore on sports, we answer your question in the affirmative: yes, those measures should be in place. If my colleagues here are correct inasmuch as they do not work, then perhaps something bigger, bolder and better could be put in place, if that is the case. Obviously time will tell. For our part, these are very important integrity measures and they are at the heart of our concerns. We therefore want there to be an effective enforcement regime so that the regulated community—the operators—know that there are serious issues that must be dealt with, and that if they are not dealt with, there will be consequences.

Hywel Williams: May I ask witnesses to speak up? I am afraid that the acoustics are not great at this end of the room, so I would appreciate it if you could speak up a little.

4 Clive Efford: Could you also say something about the use of technology? Presumably there are algorithms designed to identify irregular or suspicious activity or people who might be presenting gambling problems. Could you tell us about the application of that sort of technology, whether it works and whether you think there is enough content on that area in the Bill?

Clive Hawkswood:  As you know, there is nothing on the face of the Bill, but we know that that is something the Gambling Commission is looking at. We tend to refer to it as analytics. We actually had our AGM yesterday and had a speaker on that very subject. I do not think the science is there in the way that some people would hope it was, but a comment made to me yesterday was that in three to five years we will take it for granted that companies are offering these analytic services and protections in the same way that they currently offer, say, self-exclusion. I think its day will come—we are probably not quite there yet, but the science will catch up.

Peter Howitt:  A lot of operators currently do use these measures. Another thing worth bearing in mind is that with under-age gambling, for example, speaking for operators in Gibraltar where we are obliged to try to prevent under-age gambling, other things must be considered in order to make that easier, including access to due diligence technologies that banks and financial services companies have access to. That is one of the issues that we will be pointing out to the European Commission with respect to the fourth money laundering directive. If you are going to oblige people to take certain measures—and you should—you should also try to enable them to use technologies to better achieve those measures.

Nic Coward:  For sports, as you know, licence condition 15.1 applying to all operators within this market is why we generally support the Bill and the measures it contains. In order to ensure that licence condition 15.1 operates as effectively as we all hope it will, there needs to be a proper capturing of information and a flow of information through to the regulators, and ultimately to the sports on which the bets are being placed and about which concerns are being raised. Our view is that yes, absolutely, there should be the maximum amount of information and analysis, and not just the ability but the obligation to pass on that information, wherever you are operating—be it Gibraltar or elsewhere—to the regulator and onward to the sport.

5 Clive Efford: Another general question to you all: do you feel that there is currently a sense of urgency, or that enough emphasis is placed on a requirement to develop these types of technologies to identify problem gambling? Or is pressure required from the regulators to see that technology developed?

Clive Hawkswood:  I think lots of companies are looking at lots of service providers in this area. If regulators want to get involved, clearly we do not want to start paying for a service that the regulator thinks is inadequate. Projects are being trialled in other countries—for example, Ontario has just launched a similar analytics system—and we certainly look at those. I do not think there is any harm in the regulator pushing the industry.

6 Clive Efford: In your sector, Mr Howitt, there are requirements in licensing conditions relating to this area. Do you think there is enough in the Bill to require the industry to develop that sort of technology to protect people who may have a problem with gambling?

Peter Howitt:  It is not clear, from my review of the Bill, that that is its purpose, but Gibraltar operators are required to take measures to prevent under-age gambling and problem gambling. More can be done to ensure that gambling operators can access databases, for example, that other financial services companies can access and more can be done by regulators. If you have effective regulation where the regulator understands the operators it is regulating and has regular contact with them, I think it is much easier to ensure that they take practical steps to meet whatever conditions are applied to them, whether they are based in Gibraltar or the UK.

7 Clive Efford: I shall ask a couple more questions and then I will come back later so that other Committee members may have a chance. Will you comment on spread betting being covered by the Financial Conduct Authority rather than the Gambling Commission? That is a form of online gambling, but it has no requirement to comply with licence condition 15. Do you see that as an anomaly for enforcement?

Clive Hawkswood:  Yes, we do. We are not suggesting that spread betting companies need to come wholly under the Gambling Commission’s ambit as that issue has been looked at many times in the past, but that is one specific area where it appears there is a hole.

Nic Coward:  Absolutely; I agree with Clive. I, in one of my former roles at the British Horseracing Authority, wrote to Justine Greening in March 2011 to raise that very issue. We think it is a serious anomaly. As has been said, we do not think that the regulator’s identity matters, but there must be the same obligation and effect as is imposed by licence condition 15.1 on whatever form of operator. That should include a spread betting operator. We think that is a serious flaw in the current system.

8 Clive Efford: Do you have a suggestion of a way to resolve that?

Nic Coward:  We think there is a way in which the FCA—it will give evidence to you later—through its existing overall powers, could create an equivalent regulatory regime. Then we would rely on the Gambling Commission and the FCA to sort matters out between them to ensure that that was the case. We do not think, therefore, that there needs to be a substantial change; it is just for the FCA to take this on and then work with the sports to protect the integrity of sport, in the same way as the Gambling Commission and the regulatory regime under the Gambling Act applies.

9 Clive Efford: I have several further questions, but I want to give other Committee members an opportunity, so I will ask just one more question, which is for you, Mr Hawkswood, on self-service betting terminals in betting shops. I do not know whether you are aware of those, but they provide betting on horse racing among other forms as an alternative to paying over the counter, which would appear to be a form of online gambling. What is your association’s view on those?

Clive Hawkswood:  We do not deal with land-based betting or gambling at all.

10 Clive Efford: But this is not; this is a modified PC placed in a betting shop that provides a form of online gambling.

Clive Hawkswood:  I think you will probably have to put that question to the Gambling Commission; that is a question of law rather than policy for us.

11 Mr John Leech (Manchester, Withington): Mr Hawkswood, how many members do you have?

Clive Hawkswood:  Twenty-five.

12 Mr Leech: What proportion of the UK’s gambling market is covered by online gambling?

Clive Hawkswood:  Estimates vary, but it is probably somewhere between 20% and 25% of the total British gambling market.

13 Mr Leech: How many of your members have a stake in the UK offline gambling market?

Clive Hawkswood:  Having a quick count up, about six.

14 Mr Leech: What proportion of the online market do those six members represent?

Clive Hawkswood:  I would not know that figure off the top of my head. Some of them, such as William Hill, have betting shops and they would be one of the four biggest operators in the UK online gabling market. Paddy Power would be similar. The others would be a bit further down the list, so I do not have a figure for how much that equates to.

15 Mr Leech: If the market was regulated in the way that is proposed under the legislation, what difference would it have made to how those six members operate under the current arrangements?

Clive Hawkswood:  I do not think that it would make any difference, because, in that sort of situation, all the other companies in the online market would be involved at the same point as well.

16 Mr Leech: So what was it that made them go offshore?

Clive Hawkswood:  As you will know from our repeated sessions and briefing, it was the tax. It was the ability to compete internationally, which is exactly why all those companies were eventually compelled to move offshore. Not all of them did so willingly, but commercial forces left them with no choice.

17 Mr Leech: So why is it so terrible for the Government to want a system under which all those members who would otherwise be regulated in this country will be regulated in this country and subsequently taxed in this country?

Clive Hawkswood:  If it was solely on the licensing issue, there would be no problem at all. They all had licences already, which I think is possibly what is behind your question. It is the ability to compete. We do not want a rerun of what happened five, six or seven years ago when companies were licensed here but felt that they could not compete anymore. This time around, with this change in law, they will not have the option to go offshore. Our members will not go offshore and still keep trying to access the UK market, but others will. That is the concern.

18 Mr Leech: So in your view, if the legislation were to go ahead in the proposed form, would you see your members competing with completely unregulated online companies or would you see them competing with the offline market?

Clive Hawkswood:  No, we do not compete with the offline market. That does not arise. It would definitely be with the unlicensed offshore companies.

19 Mr Leech: So you do not believe that the online market competes in any way with the offline market? Are you not looking for the same customers?

Clive Hawkswood:  There is some small overlap, but that is not really the case. To be perfectly honest, all that I can say is that I have been involved in this for a long time and no one has ever raised any concerns about land-based competition when I have been sitting in one of our meetings.

20 Mr Leech: If the regulation goes ahead and subsequently there is taxation of the online market, what would be a reasonable level of taxation?

Clive Hawkswood:  We had KPMG do a report and it supplemented work done by Deloitte and PwC. They all pointed to a figure of no higher than 10%.

21 Mr Leech: So why should the taxation level be different from that for the offline market?

Clive Hawkswood:  I am not necessarily suggesting that it should. We would be perfectly happy for the land-based market to have its tax lowered. We are saying that our real competition is not land-based; it will be the offshore. Although 10% is still a lot higher than companies are currently paying, that is a level that we think most companies could absorb.

22 Mr Leech: What current estimates do you have for remote gambling that is not currently regulated?

Clive Hawkswood:  That is a good point. Our view is that there is almost none. If we count Gibraltar, Alderney, the Isle of Man and,of course, the UK as being properly regulated, we would say almost none.

23 Mr Leech: What are your estimates for what impact it will have if the legislation goes ahead?

Clive Hawkswood:  Again, it depends on the exact tax rate. We tend to refer to what is in the Treasury’s figures and it is predicting that they will lose 20% of the market.

24 Mr Leech: How is that figure arrived at?

Clive Hawkswood:  You would have to ask the Treasury how it was modelled. I suspect that it has looked at other jurisdictions around Europe and elsewhere and found that that was a reasonable estimate.

25 Mr Leech: So would you agree with those figures?

Clive Hawkswood:  Yes, definitely. In further discussions with the Treasury, it suggested that that would be an average over the first five years and that the figure may be higher at the end of the five-year period.

26 Mr Leech: Do you think anything could be done to minimise that figure?

Clive Hawkswood:  Yes. We have talked about enforcement mechanisms. Although we have expressed our doubts, collectively the more of them you have, the more effect they are going to have. In addition, as Peter and I have both said, if you can keep offering customers the value and choice they currently expect, they will not feel the need to look elsewhere.

27 Mr Leech: So if the Bill included the correct procedure for enforcement, there would not be any problem with that.

Clive Hawkswood:  No.

28 Mr Gerry Sutcliffe (Bradford South): May I make a declaration of interest? I am a trustee of the Responsible Gambling Trust, and I think the origins of the Bill were well thought out at the time. [Hon. Members: “Hear, hear.”] Thank you. Mr Hawkswood, you said that you thought the principal motivation for this was around tax income as opposed to consumer protection. Why do you think that?

Clive Hawkswood:  Because we do not believe that the Bill will enhance consumer protection, and we do not believe that there is any objective evidence to identify that. We refer back again to statements made to the Select Committee by the permanent secretary at the Department for Culture, Media and Sport, and to comments made by current and former Ministers. This is very much a pre-emptive measure in case something goes wrong.

29 Mr Sutcliffe: But if the tax figure was not punitive to start off with and the Government could convince you that it was about consumer protection, not about tax, would that change your view?

Clive Hawkswood:  I think we have a shared interest in consumer protection; there is no argument over that. As we have said, if this was purely about licensing, all the companies would hold licences already.

30 Mr Sutcliffe: On the issue of sports rights and sports betting rights, are you slightly concerned that the scope of this Bill is a little bit limited—that we could look in more detail at the objections from your organisation?

Nic Coward:  There is a balance. As you say, it has taken four years to get this far on this one issue, and it has taken considerably longer—indeed, we are perhaps still nowhere—to rectify other issues that remain from the Gambling Act and market moves, which you know very well. Our intent in supporting this is absolutely to support the Government and the initiatives to sort out these issues. There are ongoing issues, and horse racing in particular has experienced them, which is why I take issue with some of Clive’s previous points. The impact has been felt. Yes, the market has shifted, but I think the fact that operators could move offshore to avoid various issues—one of them being tax, one of them being levy, in the case of horse racing, and one of them being condition 15.1 in the conditions licence—was the very reason. That is what we need to address.
I also think we should address the issue that you highlighted when you were the Minister, when you started what I seem to recall was called a soft consultation on the whole issue of sport’s relationship with betting, and put in place law in the UK to oblige an operator wanting to offer a bet on a sport to enter into a contract with that sport. We, the coalition, absolutely believe that to be right here in the UK—the most liberalised market in the world—across Europe and across the world.

31 Mr Sutcliffe: I think that that is an important point, and on the back of the Parry report on betting integrity, I know that things developed from that. What concerns me is the wide range of bets available. In football, for instance, you can bet on the number of corners in a game, and on a whole variety of things. That is why I think some sort of sports right is important.

Nic Coward:  The law, in many ways, used to operate in that way. There was the longstanding copyright that sports enjoyed in the UK. There was a 1950s judgment in the Littlewoods case, as you will recall. We have always maintained that an unintended consequence of the implementation into UK copyright law of the 1996 European Union database directive has led to many of the issues we face. Had that position been maintained throughout the various market changes that have occurred in the past decade, we think sport and betting would have been operating under a regime where there had to be a contractual relationship. Under that relationship, one of the issues that would have been dealt with is: what kind of bets do sport and betting agree between themselves should be offered on its product—its sport? We thought that was right then, and we think it would be right now.

32 Mr Sutcliffe: Mr Howitt, a question for you about the white list and its workings. How do you see that? Do you think it worked well, or were there any faults in that system?

Peter Howitt:  It seems to us that the evidence that has been presented for moving to this new regulatory regime is not evidence of people moving to Gibraltar, which is not a white list territory, or other territories in order to benefit from lighter regulation. I do not think there has been any suggestion of that. It is difficult to hear that suggestion, which has been implicit in some of the comments I have heard on condition 15.
In our view, the current system works well to meet the stated objectives of the 2005 Act, which are narrow. It works very badly for some of the wider objectives, and we have some sympathy for the UK on that. Those objectives are to do with the ability of the UK operator to benefit from reciprocity in Europe and from some of the economic and fiscal matters. As far as we see it, you could better achieve the stated objectives of the current proposals—we take both the economic and fiscal to be relevant, because, as Clive said, it is about the combined effect of the licensing and taxation measures—with the current system than with the proposed regime. That is our major concern.
Briefly, we think that there are three types of activity that might be an unintended consequence for Parliament and the UK authorities. The regulatory regime does not have a precedent in terms of how it is intended to operate and how the UK will effectively exercise regulatory control over its licence holders, who may be based anywhere in the world. As you may know, in financial services there is a good regime that works well in an area of sensitive economic activity that is often cross-border. That is the passporting regime, and I believe that the FCA will be here later today. The regime requires and relies on the fact that you have to have some nexus with the person you license and regulate—not just license—to be able to interrogate them. I do not mean that in a harsh way, but in the sense of being able to understand exactly what you are controlling and supervising. We think that the proposals you have put forward are a very poor way of achieving the objectives.
There are three main things that we expect to happen. The first is an increase in unlicensed and unregulated supplies to UK consumers, which cannot be the objective of the Bill. The combined effect of increased and, to some extent, duplicative licensing costs for people who are already very well regulated, as well as taxation, however that is introduced, mean that you are going to make it very attractive for UK consumers to go elsewhere, particularly if the costs are too high on both sides. As we have said, you can try to introduce as many enforcement measures as you wish, but if America could not do that when it was trying to restrict online gambling, it is difficult to see why the UK believes it will have a better result.
The second thing that we think the proposal will lead to is licensed but poorly regulated operators, because you are not going to be relying on a “home state, host state” approach, which works very well in financial services and is largely how it works at the moment. You are then putting a lot of emphasis on the UK Gambling Commission and its ability to exercise control in foreign territories, where there is no legal basis for it to do so. We do not understand why you would move to that model when a brief analysis of other forms of economic activity, such as financial services, shows that it would be a terrible way to regulate. It is entirely unprecedented for a major country to seek to regulate people who can be anywhere in the world, with no ability to deal with those people, to manage them and know them.
In Gibraltar, the operators are known to the regulator and there are face-to-face meetings. I, as part of the association, see the regulator every week about lots of different issues and we deal with them face to face. We have seen with financial services in the UK that that is a very good model. It is a model that people have drifted away from, but we need to come back to it. There needs to be a realistic, face-to-face approach to regulation. This proposal is a form of remote regulation that will make it very difficult for the UK Gambling Commission to do its job.
The third thing, which has not been touched on by anyone—I am sorry to speak for so long—is that there could be an unusual unintended consequence. There may be operators around the world who have few transactions in the UK who will be required to get a UK licence on slender premises. The definition of whether you will need a UK licence under this Bill will mean that nearly anyone who provides gambling services could justifiably say, “I need a UK licence, because it may be available to UK consumers and I can’t properly block them.” Those people will now have what you might call a flag of convenience—they will have a kitemark that they can show to the world, which says, “I am regulated by the UK.” Consumers in other territories are entitled not to be regulatory experts and would expect that that meant something. If I was in another country—not the UK—and I saw that the UK had given its imprimatur to this operator, I would expect some form of interrogation and supervision, but this Bill in fact means that there will be no supervision of the operators. They will be required to say that they are licensed and to seek the licence, but they may not be using it for that purpose and they may in fact be selling their licensed status to the unwary, non-UK consumers.

Hywel Williams: We have to move on, so very briefly, Mr Efford.

33 Clive Efford: On enforcement, Jenny Williams of the Gambling Commission, when she gave evidence to the Select Committee, pointed out the discrepancy between the number of suspicious activities reported by all the operators licensed by the commission and of those licensed overseas—in fact, since 2007 only 10 reported from 80% of the market. She said that it was improbable that there were so few incidents. If those licensing regimes are working so well, why are there so few reports of suspicious activities from four fifths of the market?

Peter Howitt:  I think the Gibraltar regulator is probably the best person to respond. To deal with the point about the best way to achieve the objectives, you can of course impose requirements on foreign and UK-based operators who are licensed—including on a passporting basis—to notify as you wish. This is not an area subject to European law as yet—under the fourth directive, it will change—but you would not need to impose this regime in order to require licensed operators in Gibraltar, which are passporting into the UK, to notify to Gibraltar and to the UK however you saw fit. It is not a reason to implement a regime of this radical nature, which has these risks—in our view—of unintended consequences.

Clive Efford: You said it was improbable that there were so few—

Hywel Williams: We have to move on.

34 Paul Farrelly (Newcastle-under-Lyme): Time is short, but I have a few questions, so if the answers could be brief, I will be grateful.
Mr Howitt, are you as an association or, to the best of your knowledge, are any of your members planning a legal challenge to the Bill?

Peter Howitt:  I think that we have been up front in saying that we are considering the legal option, but quite frankly we are working hard and very much hoping that it will not come to that. We are also in discussions with DCMS and the Treasury, and we are grateful to be here today.

35 Paul Farrelly: Very briefly, your challenge would be on what grounds?

Peter Howitt:  The grounds are that it is a disproportionate response to the stated objectives. It would require additional licensing and regulatory cost to people where there is no evidence. The large part of the UK market is currently served by Gibraltar. There is no evidence that that is required.

36 Paul Farrelly: Mr Hawkswood, what level of taxation, which is very important to us, on a gross profits basis do you think would encourage any of your members who are currently based in Gibraltar physically to relocate back here?

Clive Hawkswood:  The physical relocation is not linked to the tax. The whole point is that—this is a basic assumption—the companies are not being asked to return to the UK. Individually, they may review their business models, but I do not think that there is any requirement for them to do that in the tax—

37 Paul Farrelly: No, it was a question about encouraging them—taxing them will not encourage them back to the UK, will it?

Clive Hawkswood:  No.

38 Paul Farrelly: They are already there?

Clive Hawkswood:  Some of them are already here.

39 Paul Farrelly: Okay. And VAT is important as well, is it not?

Clive Hawkswood:  VAT is hugely important—we should not forget that. We always say that it is wrong to focus just on the rate of gambling tax; it is the total cost of doing business in the UK.

40 Paul Farrelly: May I ask you one more question? If bet365 and its sports, gaming and gambling activities are based here and very profitable, why cannot your other members be profitable as well at 15% tax?

Clive Hawkswood:  I think someone asked that question on Second Reading and I could not improve on the answer: bet365 themselves make it clear that if the proposed regime was in place, they would probably be forced to move as well.

41 Paul Farrelly: Finally, Mr Hawkswood, the Gambling Commission is currently consulting, and responses have to be in by 4 December. What is your view on what you might call the Full Tilt consultation—on the separation of moneys and disclosure? Also, do you have any particular issues with the Gambling Commission’s consultation on licence changes?

Clive Hawkswood:  First, there is one consultation on the protection of player funds, which is a huge issue for the industry. We are in discussion with the Gambling Commission about what the appropriate levels might be. We are currently suggesting that their base-level protection is not quite high enough, but, again, there are lots of different ways to skin that cat, and I am sure we will come to something that works well.
In terms of the wider consultation on the licence conditions and codes of practice, two or three issues remain outstanding—

42 Paul Farrelly: Can you just name them, briefly?

Clive Hawkswood:  One is that the Bill refers to the physical location of players. What we are saying to the Gambling Commission is, what is a reasonable way of ascertaining that? We do not want to be caught out if someone changes planes at Heathrow one day and places a bet while they are there. I am sure, again, a reasonable approach will come to a reasonable solution. That is probably the key outstanding issue at the moment.

43 Mrs Grant: We are getting very short of time. I have listened carefully to your comments this morning and noted the reservations, but can I just ask, do you support the aim of the Bill to create consistent regulation across the sector?

Clive Hawkswood:  Our position is that, for UK consumers, there is a great deal of consistency already, because they are regulated, effectively, by only four regulators, one of them being the Gambling Commission. Two of them are on the white list, and the Government have already said they are comparable to the UK. If Gib needed to be on the white list, we have no doubt it would be on there as well.

Peter Howitt:  We do not disagree with the stated aims of the Bill to protect UK consumers. Our concern is that you will, in fact, damage UK consumer interests and the reputation of the UK as a regulator with this Bill, which is not necessary to achieve the wider policy and political objectives that the UK wishes to achieve.

Nic Coward:  Our answer is yes, we very much support the Bill. We consider that it could go further in a number of areas. I think Mr Howitt answered Mr Efford’s earlier question. At the moment, there is a failing—this is what Jenny Williams alludes to, although I am not implying it but expressly stating it—because there is no nexus between an operator and the sports on which they operate if that operator is based in Gibraltar. That is something that sports across Europe wish to see addressed across the whole European Union and the whole world. There has to be a nexus, to take Mr Howitt’s word, between the sport and the operator offering a bet, and unless and until that happens, any legislator anywhere is failing sport.

Hywel Williams: This will have to be the last question, as we finish at 10.15 am.

44 David Morris (Morecambe and Lunesdale): I will make it very brief. It is about taxation. Would the level of VAT have any bearing on where a gambling company would relocate, online or offline, given that there are differing VAT rates across Europe?

Clive Hawkswood:  It is clearly a factor, and I guess that has become obvious from what we have been saying. If you look at the commercial model, the differential tax burdens across jurisdictions are hugely important. That is why not just our industry but industries generally are very selective about where they base themselves.

45 Clive Efford: Could you comment on pre-watershed advertising relating to sporting events? Sports themselves are concerned about the image it is presenting of their sports and the way coverage is saturated with these advertisements. Do you have any comments on that?

Clive Hawkswood:  Yes, I certainly do. I wrote the industry advertising code, which introduced the watershed. Without that, all forms of advertising would be offered before the 9 o’clock watershed. If there is evidence of harm, we would of course be happy to review that.

Peter Howitt:  I can only agree with Clive. I do not believe the Bill makes any difference in that respect. The industry in Gibraltar supports reasonable restrictions to protect people from problem gambling and over-advertising.

Hywel Williams: I am afraid that brings us to the end of the time allotted for the Committee to ask questions of this panel. I thank you on behalf of the Committee.

Examination of Witnesses

Paul Bittar, Paul Scotney, Tim Lamb and Roy Ramm gave evidence.

Hywel Williams: For the record, please will the new panel introduce themselves?

Roy Ramm:  My name is Roy Ramm. I am a director of the National Casino Forum.

Paul Bittar:  Paul Bittar, chief executive of the British Horseracing Authority.

Tim Lamb:  My name is Tim Lamb. I am the chief executive of the Sport and Recreation Alliance. Some of you may remember it as the CCPR. We are the umbrella body for the governing and representative bodies of sport and recreation in the UK. Prior to that I was chief executive of the England and Wales Cricket Board.

Paul Scotney:  My name is Paul Scotney. I am here to represent the Sports Betting Group, as one of the founding members. Prior to that I was the director of integrity services at the British Horseracing Authority. I will also mention that in a previous life I was a senior police officer, which may have some relevance to later conversations.

47 Mr Sutcliffe: May I speak to you first, Mr Ramm, regarding the casino industry? At one of the evidence sessions of the Select Committee the former sports Minister said that he did not get everything right in the Gambling Act 2005. One area where he thought he had got it wrong was casinos. I am not talking about large or small casinos—the numbers—but issues around casinos being perhaps the most regulated part of the sector. Do you think that with this Bill there is an opportunity to put right some of the wrongs that happened in the past?

Roy Ramm:  I do think there is an opportunity here. The casino industry has been pretty stagnant for the past five years. There is still no growth in the industry. Here is an opportunity to give casino operators the possibility of offering online betting and gaming through terminals in casinos in precisely the same way that they are available to consumers outside.
We are simply asking the Government to acknowledge that if I am a licensed operator in the UK, and in this hand I have my operator’s licence granted by the Gambling Commission and in my other I have my remote licence, also granted by the Gambling Commission, I could offer that remote product in my own casino premises. I can offer it anywhere else, I can even advertise it in my own casinos, but unless the Bill is amended we simply will not be able to offer that product.
This is simply a way to take what we think are some errors in the Bill to give the casino industry the opportunity to offer a wider range of products to customers. It is important to see that this is a different product. It is not synonymous with a category A gaming machine. We are not asking for unlimited numbers of these devices. We are simply saying, “Here we are. Let’s offer them. Secretary of State, make your mind up how many we are allowed to offer. Within the casino, here is a terminal on which you can access online gaming in all its forms.”
It gives us the opportunity also to look at online gaming in a controlled environment, and to gather data about it in precisely the same way that the Gambling Commission is asking us to gather data on our other gaming devices. We do see this as an opportunity to level the playing field. The Minister was careful to make that point in her speech on Second Reading. We think there is an opportunity to level the playing field even further and to embrace land-based casinos.

48 Mr Sutcliffe: Moving to you, Mr Bittar, regarding integrity issues. Through your body covering horseracing you have been involved with lots of cases around betting integrity issues. What do you see as the necessary relationship for the proper regulation of integrity issues in the betting industry?

Paul Bittar:  For the information of the Committee and for the purpose of answering that question, I should say that I had 12 years’ prior experience to the British Horseracing Authority in other regulated horseracing environments: Racing New South Wales, Racing Victoria and chief executive of New Zealand Thoroughbred Racing. In answering that question, from an international perspective there is no question but that British horse racing falls well behind any other major racing jurisdiction in terms of its ability to access information from betting providers. It is the only major “regulated” horse racing jurisdiction that I am aware of not to have access, by way of legislation, to betting operators betting on their product. At the moment we have agreements in place with only a very small number of operators. We are obviously very supportive of the Bill, because the licensing of remote gambling brings clear integrity benefits to British racing.

49 Mr Sutcliffe: Mr Scotney, does your organisation see the importance of this ability to share information between the betting companies and the sports?

Paul Scotney:  Absolutely. Without this information you cannot carry out a meaningful investigation. That is the crux of it. We need that information, and that is personal information. The situation we have now, which has not changed since we appeared here in February, is that some regulators voluntarily give us the information we want and are very co-operative. Some take the middle ground because they are unsure about what they can and cannot do, and they may give it and they may not. Then there are others which do not share at all. We have an inconsistent position, and without access to that data we cannot meaningfully investigate corruption in sport.

50 Angie Bray (Ealing Central and Acton): May I turn to the issue about bricks-and-mortar casinos? Mr Ramm, were you slightly surprised that the Government did not act on the recommendation in the Select Committee’s report that some kind of level playing field should be provided in this respect?

Roy Ramm:  We were surprised and disappointed. We have been asking for a number of years for this aspect of modernisation to be applied to the casino industry. We felt that we made a compelling case to Mr Whittingdale’s Committee, and we saw the recommendation and welcomed it. We perhaps expected further dialogue around the impact of that, and we are disappointed not to see the Bill embracing the land-based industry.

51 Angie Bray: It has been said that your proposals for allowing internet gaming in casinos would lead to the proliferation of gaming sheds. Is that correct? Could you tell the Committee exactly what the physical impact would be of allowing online gaming in existing casinos?

Roy Ramm:  I am not entirely sure what a gaming shed might look like, but a British casino varies in size from something with about 14 tables up to the Westfield casino at Stratford, which has about 50 tables. If this Bill were amended and we were allowed to offer some online access, you would probably see an area in each of the larger casinos where there would be an advertisement for that casino’s online product. There would be terminal access in an area within the casino, with all the controls which are applied to all the other gaming products, including closed circuit television and our trained and licensed staff. You would not see a fundamental change to the appearance of the casino.
When one talks about slot machines I can only imagine that people are thinking of something you might see in the United States or Australia. That is not going to happen. Moreover, what we are suggesting, as we have said in our written evidence, is that we are perfectly happy to accept some control from the Secretary of State on the number of access points which we would like to be able to offer our customers. So I really do not see that there will be any fundamental change to the way casinos look and operate.

52 Angie Bray: If you do not achieve the level playing field that you are seeking, what consequences do you think that might have for the bricks-and-mortar casinos?

Roy Ramm:  I think that we are in a bit of a period of stasis. We have not had any changes. In his questioning Mr Sutcliffe referred to when the Act passed, when some things went pretty badly wrong. What you see now in the British casino industry is that although the 2005 Act allowed for 16 more casinos, in the last five years the number of casinos in the UK has not changed. If we are unable to offer a variety of products, and if we are unable to evolve our products and offer modern products, our customers will eventually vote with their feet. We are continually offering to try to improve our social responsibility credentials. We have just come forward with a new programme which has been pretty well received, and we are working hard on that. We want to provide a safe environment, and within it the widest range of products.

53 Angie Bray: What sort of employment do you provide in this country?

Roy Ramm:  There is a real difficulty here when people look at the gambling sector and perhaps look at betting shops and casinos all as one. I am not in any sense saying negative things about the betting industry; I am just saying that by way of comparison. The average betting shop employs six people. The average casino employs 100 people. Of those 100, 80% are holders of a personal functional licence or a personal management licence issued by the Gambling Commission. We are, as Budd intended and as the Bill intended, at the top of a regulatory pyramid and we offer an enormous amount of consumer protection.

54 Jim Shannon (Strangford): My interest is in problem gamblers and vulnerable people with serious problems. I am keen to hear what the industry intends to do to help those with gambling problems. Protection for problem gamblers needs to be enhanced. The self-exclusion regime that has been discussed does not fully address the issue. Would you be interested in and supportive of the idea of a one-stop shop approach?

Roy Ramm:  What we are trying to achieve through what we call our “playing safe” agenda is to look carefully at how we can improve the way that the industry, in particular the casino industry, deals with responsible-gambling issues. We have 12 projects in total that look, first of all, at how we can identify the particular risk of gambling products and convey that risk to the customers—to the people who are playing—so that they have a better understanding of what they are playing. We are also looking at how we can bring together data from across our businesses, so that, for example, somebody who wants to self-exclude from one company can self-exclude from other gambling activities.
It is a very complex issue and I am in no sense ducking it or trying to portray that as an easy win. It is very complex. For example, a person who gambles in one specific area might not be helped by a national self-exclusion scheme when what he or she might really need is an exclusion scheme that embraces a number of gambling activities in a single area, such as casinos, betting, bingo, arcades and even the lottery. It is a complex issue, but I am very happy to send you our “playing safe” agenda and to talk through it. I could frankly spend the rest of the day talking about it.

55 Clive Efford: Is it regrettable that the Bill does not actually deal with the definition of cheating in relation to match-fixing and irregular activity? That is an open question to anyone.

Paul Scotney:  Yes. If we are actually talking about the criminal offence of cheating, I think the Parry review contained a recommendation that it should be revisited. Our position is that that criminal offence does not actually work for us in terms of sport, because it is a criminal offence of cheating in betting. We would like to see that revisited and such a thing as a criminal offence of cheating in sport for betting purposes to be considered.
The history is that the number of prosecutions for criminal offences of cheating is minimal. In fact, my understanding is that it is a single figure. I certainly know from my background as a police officer that there is a reluctance to use that legislation. At the time that it was brought in, a number of people within sport highlighted their concerns about the fact that it only carried a penalty of two years. When you put that alongside the fact that such offences as shoplifting can carry 10 years, it is disproportionate. From a sports perspective, we see that the criminal offence of cheating is simply not working for us.
On prosecutions of cheating within sport, while we do not necessarily want to see it all the time, there are criminals who we do want to see prosecuted for corrupting sport. The legislation does not really fit for that to be achieved. I can give examples from a number of sports where we have gone to the police with what they clearly accept is criminal activity, but they find difficulty in prosecuting because of the way that the legislation works at this time. In our view, it is just not fit for the purpose of dealing with cheating in sport.

Tim Lamb:  It is important that the harshest penalties are available for people who cheat at sport for betting purposes—I am not talking about diving in the penalty area. I was chief executive of the England and Wales Cricket Board when there were a number of very high-profile match-fixing cases and the damage done to the reputation of cricket was absolutely enormous.
I am sure that if one thing unites everybody in this room, that is that it is absolutely crucial that there is integrity in sport, and that people watching a sporting event know that it is a genuine contest between competitors trying to win. Therefore, those who corrupt sport or take advantage of it or diminish it deserve to face the harshest penalties. That is why there needs to be a clearer definition of cheating at sport for betting purposes, with the full force of the law coming to bear against those people.

56 Clive Efford: Could the Bill do more on match-fixing? What proportion of irregular activity takes place through legitimate online companies and what proportion is through unregulated or unlicensed companies?

Tim Lamb:  I arrived for the earlier evidence, where it was mentioned again—as, indeed, we mentioned in our written submission—that it was no coincidence that when licence condition 15.1 was introduced, there was a flurry of reported cases of suspicious activity to governing bodies. That is why it is absolutely essential that there is a consistent regulatory regime covering not only the UK betting market, but also those betting operators based offshore. That is the fundamental principle behind the Bill—one that myself and other members of the Sports Betting Group and, indeed, all the sports in this country fully support.

Paul Scotney:  A number of the recent cases dealt with in this country by sports governing bodies have taken place on the legal markets, so the notion that it is all about illegal betting is simply not true. We accept that there are threats to some sports from illegal betting in other countries, particularly football and cricket, but for many of the other sports, such as horse racing, snooker, darts, rugby and tennis, it is as much the legal markets. That is why we fully support the Bill, to get access to the information that we need to carry out meaningful investigations.

57 Clive Efford: Do your members have any concerns about whether the commission has sufficient powers to enforce the legislation?

Paul Scotney:  We have already touched on spread betting, which was covered quite well in the first session. We still have concerns about that area. In some quarters, people are saying that the relationship with spread betting companies is working perfectly; the reality is that it is mixed. Yes, we are getting co-operation from the spread betting companies voluntarily, but we would like to see what will happen at the point of consumption with the others and bring them within a regulatory regime to get access to the spread markets. That is a gap that we are concerned about.
At the moment, a spread betting company can decide whether they want to share betting data with us. We would say that, as will be required by all the others, they should have to do that as a condition of their licence. Nic Coward outlined how that could be achieved, and we agree with that.

58 Clive Efford: Have you discussed that with the Financial Conduct Authority? If so, what was the outcome of that?

Tim Lamb:  We have written to the FCA and we have had a helpful response. The intention is to meet with it to see if we can work collaboratively together. But it is an anomaly that spread betting is regulated by a different authority from the rest of betting in sport and we strongly believe that the principles underlying licence condition 15.1 should be extended to spread betting as an absolute minimum. Ideally, we would like to see spread betting come under the auspices of the Gambling Commission rather than the Financial Conduct Authority.

Paul Scotney:  Our concern is that if cheats within sport or people who look to corrupt sport see an easier target, they will go for that target, and if spread betting is left outside the regulatory regime, that could be a softer target. I am not saying that it will be, but it could be and it would seem an anomaly not to bring it into the same regulatory regime as the other operators. Despite what some people say, when you bet on the spread betting markets, that is a bet. They take spreads on a number of sports and it is a concern. At the moment, it is voluntary, but we would like to see more formality.

59 Clive Efford: On the current system, which is regulated by the FCA, if they were found to have identified or been aware of suspicious activity and not notified anyone, what would happen to them?

Paul Scotney:  The situation is that we simply do not know what is going on. If I can turn the question round, I would say that from my experience we have not had any proactive reporting from the spread companies. The Gambling Commission may say something slightly different from the sports perspective, but we have had no proactive reporting. We have had co-operation when we have gone to them with specific information that we know of. Our concern for sport is again that we do not know what we do not know. It is a bit like the situation that Jenny Williams talked about with the disproportionate amount of referrals from Gibraltar. It is similar with the spread betting companies. It just does not seem as though they are not seeing things, but we get no proactive reporting of anything.

60 Clive Efford: What if, at some time in the future, the Gambling Commission were made aware of it? The spread companies are also betting companies and are licensed for that side of their operation. In those circumstances, if an operator that is not licensed for spread betting, but licensed for betting, was subsequently found under spread betting to have behaved in a way that would have breached its licence conditions for betting, should the Gambling Commission be able to take that into consideration as to whether it is a fit and proper organisation to operate in the betting industry?

Paul Scotney:  Absolutely. That is probably why it is getting co-operation from the spread companies at the moment. My understanding is that the licence does not cover those spread markets, only their activity on the fixed odds markets. So, yes, we have a system where they are co-operating, but it is still essentially a voluntary system. If it was still allowed to take that into consideration in terms of their licence, then it would bring us some way to where we want to be.

Tim Lamb:  If I may supplement that answer, a key thing is that the information needs to be shared with the relevant sport’s governing body. That is the whole point. Mr Scotney will tell us of examples. If the British Horseracing Authority is advised that suspicious activity is going on, it can immediately notify the stewards and maybe deter somebody from engaging in corrupt activity. Similarly with cricket, if it is known that there are suspicions abroad at the start of a cricket match. The problem with the arrangements for regulating spread betting by the FCA is that it is not obligatory for the information to be shared with the governing body. That is the difference between that regime and licence condition 15.1.

61 Clive Efford: Yes, I realise that what I was suggesting is not an ideal solution, but it is perhaps a backstop if we cannot get spread betting under the licensing regime of the Gambling Commission. May I ask about the effectiveness of ISP blocking and financial transaction blocking? How effective do you think that is, and has the potential to be in future?

Paul Bittar:  There are obviously jurisdictions around the world where those sorts of controls are in place. As to how effective they are, it is debatable. The preferred option from a sports perspective is that the legislation provides for all those companies to provide information integrity and regulatory information to the sport. However, these cannot be separated from the economics of the sport. The sport’s ability to fund its own regulation and integrity should be linked to those companies taking bets on that sport. Ultimately, ISP blocking or other prohibition-type controls would not be the preferred option. The preferred option would be to have an open, regulated and properly funded market for the British consumer. That is the way that the best and more enhanced regulatory and funding jurisdictions operate, in both a sporting and horse racing context.

62 Clive Efford: So it is information more than those—

Paul Bittar:  It is funding and information together. It is the ability of the sport to fund its regulation and integrity operations, and it is the ability to get access to information direct from the betting company and not have to seek it from a third party—either the Gambling Commission or others. Long term, it cannot be done on a voluntary basis.
To return to your point about spread betting, because that is not a binary outcome—it is not as straightforward as whether a horse will win or lose—it is much more difficult to regulate it and to put in place integrity controls for it. If you look internationally, the best jurisdictions operate an open market for the consumer, but it is one that is well regulated with legislative protections that ensure the sports are appropriately funded to fund their own regulation and integrity.

63 Clive Efford: Does anyone else have a comment on ISP blocking? Okay. You mentioned funding, Mr Bittar —may I ask about the levy? For the first time, offshore betting companies will be required to be licensed under the Gambling Commission, as are the onshore licensed companies that contribute to the levy. Do you see this as an opportunity to create a level playing field in relation to the levy?

Paul Bittar:  Racing believes that the Bill should create a level playing field in terms of betting operator requirements on sports regulation and integrity, but it should also create a level playing field with respect to contributions to the levy. Otherwise, ultimately, it would be anomalous, and it would not be a level playing field for those operators based onshore or those operators that the British Horseracing Authority might have done commercial and voluntary deals with so that they are contributing to British racing. A very significant share of the market operating offshore would be brought under this regulatory environment that is not required to pay a levy.
I make a distinction for operators making a voluntary contribution, such as Betfair and the big four operators—William Hill, Ladbrokes, Coral and Betfred. We recently did a voluntary deal with them, but that is an additional voluntary contribution—it is not captured by the levy. It is anomalous that the provisions would deal with the regulation but not the funding.

64 Clive Efford: You mentioned that deal, but you have no way of knowing that that is a reasonable contribution that should come back to the sport, do you?

Paul Bittar:  No, not in terms of the fact that it does not recognise their online or offshore businesses. It does recognise the fact that those four operators see a need for and value in investment in British racing. They believe that there is an opportunity for British racing to perform better.
Racing is very different from any other sport, in that the nexus between betting and racing is much stronger than for any other sport. Our fixture list, which is almost 1,500 race meetings a year across 60 venues, all regional and rural-based, is developed specifically as a betting product. It is bespoke betting product. It is delivered in time slots—we race at night and in winter, and we do that for the betting industry. Our fixture list is put together for the betting industry. Estimates would be that almost 50% of that market has now moved offshore. The only contributions coming back from offshore are those done under voluntary contributions.

65 Clive Efford: The Government have consistently said that European state aid rules would not be met if we were to introduce a levy on online operators. In the light of the decision on the levy in France, do you think that that argument still stands, or is the door now open for the levy to be applied to online operators?

Paul Bittar:  Well, certainly British racing disagrees with the Government’s interpretation on whether it would be a breach of state aid rules. The European Commission approving the French proposal for a parafiscal levy for online horse race betting, as released in the summer, clearly sets out an opportunity for that to be explored. We are working with Department for Culture, Media and Sport on what that could look like, but the legal advice we have certainly suggests that we have every right to disagree with the Government’s interpretation.

Tim Lamb:  I would like to make a general point about funding and integrity measures, if I may. It is important to point out that the Sports Betting Group is primarily concerned with integrity, and with helping governing bodies to maintain their own integrity and have proper measures and procedures in place. However, governing bodies and authorities are spending increasing amounts of money maintaining integrity. We have an anomaly whereby despite the fact that leading lights in sport such as Jacques Rogge, Michel Platini, Hugh Robertson and others have cited match-fixing and corruption in sport related to betting as equal in seriousness to doping, something like £6 million of Exchequer funding is available to fund anti-doping measures, and even if that is reduced, as the coalition Government intend, to £5 million, that is £5 million more than is available to help sport tackle corruption as regards betting. It is worth making that point.
We know that resource is an issue for the Gambling Commission, because it has told us so when it has attended meetings with the Sports Betting Group. It is, therefore, important that ways are found to assist governing bodies that are spending increasing amounts on maintaining integrity, and to have those funds available to them. The Sports Betting Group would not necessarily want to get involved in the details of where that money comes from, although we certainly have our views on it. The key point that needs to be made is that this is such a serious issue, which has been highlighted consistently in recent times, that there needs to be some assistance available to governing bodies to help them fund their work.

66 Clive Efford: Just to clarify one point, is that primarily concerned with activities online?

Tim Lamb:  As Mr Scotney said earlier, suspicious and corrupt betting is not confined to online. As we all know, hardly a week goes by without a whiff of suspicion in some sport or another.

Paul Scotney:  It is not just online. People forget that a great deal of betting takes place over the telephone. We are talking about all areas of betting, whether it be betting shops, online or telephone. The corruption can come from anywhere.

Clive Efford: I did not say “all”; I said “primarily”.

Paul Scotney:  Primarily it would be online and telephone.

67 Paul Farrelly: When the Select Committee looked at football governance, we had the benefit of the advice of Rick Parry, who used to run Liverpool football club. Rick has done a lot of work, as you know, on betting. He has been in touch in advance of this Bill, and he points out that this is the regulatory end of a series of measures that will raise hundreds of millions of pounds more in tax for the Government. Therefore, is it not now time that the integrity unit recommended by the sports betting integrity panel report was finally given some help from a small percentage of these extra resources that are going into the Treasury? He says, indeed, “there will never be a better opportunity”. What do you think?

Paul Scotney:  It is very difficult for us to say anything other than that we think that is an excellent idea. That is what Parry recommended four years ago, and it is what we desperately need. Sports need help. At the moment, yes, the Gambling Commission can help, but there is only so far that it can go. The Sports Betting Group tries to help in any way it can, but we do so without any funding.

Paul Bittar:  By way of comparison of the funding, in the previous jurisdiction where I worked in Victoria, the industry size was about 35% the size and scope of British racing, but it had twice as much central funding. As a factor of funding, it was six times better funded. What that translates to, in terms of the ability to regulate and put in place appropriate integrity systems for the sport—

68 Paul Farrelly: And consumer protection?

Paul Bittar:  And consumer protection, absolutely. There are a number of operators that we have voluntary arrangements with, which provide all that type of information. There are a number of operators based onshore that are paying to contribute to the funding of the regulation and integrity of British racing. This is very much about a level playing field, not just from a regulation perspective but in terms of who is contributing to those regulation and integrity costs.

69 Paul Farrelly: So if we have a Bill about consumer protection in terms of licensing gambling, which is part of a package that raises a lot more money for the Government, you all believe that it is high time that some of the recommendations from the betting integrity panel report were put into practice.

Tim Lamb:  That is absolutely right. That was quoted extensively in the SROC submission, which you have seen. We were in correspondence with the former Minister for Sport, Hugh Robertson, about the importance of finding additional funds to help integrity measures. I would agree wholeheartedly.

Paul Scotney:  Watching sport has never been more popular in this country. As everyone in this room knows, it is massive, but it is not just the regulators that want clean sport; it is the public. They expect what they are watching to be clean. Sport is a fundamental part of British life now.

Paul Bittar:  I would add that it is also the gaming companies that want sport to be clean, because ultimately their livelihood, due to consumer confidence in sport, comes down to the fact that the betting companies need sports to be clean.

70 Nick Smith (Blaenau Gwent): I just want to probe something that Mr Lamb said, and retrace our steps a little. Mr Lamb, you talked about the FCA having responsibility for spread betting. You said it was not obliged to communicate with sporting stewards—

Tim Lamb:  Sports governing bodies. The point is that if the governing body is aware of a whiff of suspicion it can notify the people on the ground, which might be on a Saturday morning or Sunday afternoon. At the moment the arrangements are such that it might only come to the attention of the sporting authorities several days later, when it is actually too late to deter somebody who has the intention of cheating.

Paul Scotney:  There is certainly a delay in that, yes, we do get some co-operation from the offshores, but that takes an inordinate amount of time. It takes much longer. The situation for sports governing bodies, quite obviously, is that we want to stop the corrupt act taking place if we possibly can. The early indications of that will come from the betting markets. We certainly get good co-operation from the betting operators here, who do give us that; and we are able on occasions in this country to stop the corrupt acts before they take place. It is much more difficult if it is something that is going through online, on the telephone, abroad, because there is an inordinate time delay and we think if they came within the licensing regime that would change.

71 Nick Smith: What is the reason for that? Is it because the FCA just is not as fleet of foot? Have you got an example where there was poor communication, and if so, what happened?

Paul Scotney:  Can you clarify the question? Are we talking about the spread betting or the offshore?

72 Nick Smith: I am interested in the FCA and how quickly it can respond to concerns that may be raised. It is about its ability to contact governing bodies if necessary. Are there good examples of why that is a problem, or are you making an in-principle point?

Paul Scotney:  I think it is in principle. The relationship we have with the FCA is pretty distant. I think that is principally because of the fact that there is little proactive reporting from the spread markets, which is its main area of concern. Sports now approach the betting companies directly and use the Gambling Commission where we can, to try to get what we want out of the spread betting companies. I am not saying that that does not work: it does—but not as well as it could, and again, there will be delays. The FCA is going to see things, live time, that we will not necessarily see on the spread markets. We can monitor the fixed markets quite easily, but we do not have that ability to monitor the spread markets—so if something is perpetrated on the spread markets we are unlikely to know about it until it has happened, unless it tells us.

Tim Lamb:  It is a truism to say that the only thing wrong with a voluntary arrangement is that it is voluntary, but that is the case in this instance. We cannot rely on the good will of a handshake. Integrity in sport is far too important for that. It must be obligatory for all betting operators, whether on the spread market or in other markets, to share information not only with the regulatory authorities but with the sports governing bodies as well.

73 Mrs Grant: Roy, can you explain to me really clearly why you think it is appropriate for casinos to be able to offer unlimited stake and prize gaming on remote terminals that, according to the description that you gave a little while ago, will actually look and feel just like gaming machines, given the current restrictions and limits on stakes and prizes for gaming machines?

Roy Ramm:  What I said was that there would be an area that would be set aside. They would not necessarily look exactly like gaming machines. They would look like a group of internet terminals advertising the online product.
To get to the nub of your question, if we look around, there are probably 50 unlimited stake and prize machines in this room. We all have one. The iPads that your colleagues around the table are using are unlimited stake and prize machines. There is no reason why they should not be available in a casino where we are training 80%—sorry, 100%—of our staff in controlling and looking for people with problem gambling; and where we are licensing 80% of those people by the Gambling Commission with an obligation to look for people with problem gambling.
If you look at the number of gaming machines in casinos, Minister, you will find that it is less than 2% of all the gaming machines in the UK. Even if you choose to see—I would argue strongly that you should not—an internet terminal as entirely synonymous and analogous with a gaming machine, a few more in a casino is not going to make any difference, but they are significantly different products. You will be able to play online poker, international online poker with people across the world, and virtual table games on those machines. To see an online gaming terminal as entirely synonymous with a category A slot machine is a misunderstanding of the two products.

74 Mrs Grant: But there are similarities, surely.

Roy Ramm:  Of course.

75 Mrs Grant: And bearing in mind the rules and regulations and the limits that are currently in force, is it not unlimited stakes and prizes by the back door? That is how it seems to me.

Roy Ramm:  It is not by the back door. We have been very open about it. From when the 2005 Act first came before Parliament, an immense change has taken place in the online industry. Online gaming has absolutely exploded. That Act now is looking anachronistic. Mr Sutcliffe invited me to comment on this earlier. What has happened since that Act passed into law is a real change in the gaming landscape.
The people at the top of that pyramid, over which the Act was intended to have the strongest controls, are excluded from that particular area of gaming. Give us the opportunity to offer that gaming in a limited amount. We will apply the same conditions for players’ safety as our online colleagues apply and overlay it with the player protection measures that we have within the casino. We will also give you a platform to look at the impact of that online gaming in a controlled environment. I cannot see the downside to that.

76 Mrs Grant: Perhaps I am missing something here. You are still providing devices for members of the public that allow them to gamble where there are unlimited stakes and prizes. If I happen to have an iPhone in my pocket, that is one matter. You are not providing it. That is not your responsibility; it is mine. You have a bricks-and-mortar building and you are making provision for people to do something.

Roy Ramm:  Minister, if this were a casino and we were in here, I could have an advertisement on the wall that said, “Visit Caesars UK online casino.” The customer would come to me and say, “That’s great. I’d like to do that.” I would say, “Yeah, but I can’t offer you the products. You’ve got to go outside.” For me, that does not make any sense. From a consumer’s perspective, it does not make sense. From our ability to look at remote gambling and have a better understanding of it, there is not another opportunity. By its definition, you could go and play this in your bedroom, in the tea rooms downstairs or wherever. If you are playing it in a casino, here is the opportunity to see that product being used and for us to gather data on it and to research on it and to report back. We are not asking for an unlimited number. Here is a controlled environment in which you can use that product.

Helen Grant: Thank you.

77 Clive Efford: I have a few more questions. Do you think there are examples of best practice among other regulators that you would like to see included in our regulation?

Paul Scotney:  I certainly think that, on the betting side, you can look at the legislation in countries such as Australia and France.

78 Clive Efford: In what respect?

Paul Scotney:  Australia, among a number of other countries, is introducing a criminal offence of cheating in sport for betting purposes.

Paul Bittar:  That will supplement existing legislation in Australia known as race fields legislation, which effectively enables the governing body ultimately to approve a wagering operator. That wagering operator, in addition to providing regulatory and integrity information, is also required to pay the levy equivalent, as set down by the governing body. That is provided for by legislation in each state. What Paul has just mentioned will supplement that legislation.

Paul Scotney:  On the back of that, they are also setting up a national sports integrity unit that will have a mix of specialists, including police officers. We have nothing like that in this country.

79 Clive Efford: Do you know how that is funded?

Paul Scotney:  I assume it is funded centrally, probably through a mix of betting and the Government.

80 Clive Efford: We have talked about resources for the Gambling Commission, but do you feel that any specific areas of its activity might be under-resourced?

Tim Lamb:  At the last meeting, they were at pains to point out that one complicated case can cost about £100,000 to investigate. The senior director from the Gambling Commission who came to see us emphasised that a lack of resource was a real issue for the commission. That has to be a worry. It comes back to my point that we spend £5 million to £6 million a year on anti-doping, which is absolutely right because integrity in that area of sport is hugely important. Whereas many leading personalities in the world of sport have highlighted breaches of betting integrity as equally damaging as doping, there is no similar funding available for the work done by our governing bodies and others.

81 Clive Efford: I cannot find the specific reference in my copy of the Select Committee report, but I understand—I will be corrected if I have remembered it wrong—that the Gambling Commission indicated to the Select Committee that it felt that the increased income from licensing would be sufficient to carry out its duties. You seem to be suggesting that the commission said something different to you.

Tim Lamb:  No, that was based on the situation as it currently stands, rather than the potential for increased licensing fees coming in.

82 Clive Efford: Okay. I think that is an area we will have to pursue further.
May I test your knowledge of technology? On developing software to protect particularly vulnerable people from gambling online, are you aware of any effective methods for using algorithms and other forms of software to detect such activity? Do you think more can be done?

Paul Scotney:  It is certainly something that is being looked at. As Clive Hawkswood said, we are a year or two away from doing that, but they are looking at software that can help with problem gambling and other areas of integrity, such as identifying when people who should not be betting are betting. That is a new area, and it is being looked at, but I think it is a year or two away.

83 Clive Efford: So you are not aware of any jurisdiction at the moment that has such software?

Paul Scotney:  No, I am not.

84 Clive Efford: One of my concerns is that, when we talk about protecting the most vulnerable people—I do not mean to criticise you in any way—people say, “It is being looked at. We are discussing it. We are developing it, and we are a bit off.” We seem to be on the cusp of state-of-the-art technology that enables people to gamble, but we do not seem to be quite there with protecting the most vulnerable. Do you think that the regulation should force our hand a bit more to move things on?

Paul Scotney:  Yes; I know that was mentioned in the previous session. When we say, “It’s happening,” it is happening now. We are actively pursuing that. We are trying to find technical ways—IT ways—of identifying not just problem gambling, but people who should not be gambling, people who are in breach of sports governing bodies’ rules. We are collaborating; we are talking with the betting industry. The sports and the betting operators are talking to try to find solutions to this actively.

Paul Bittar:  There are controls in place in a physical sense for gaming machines in other jurisdictions—for example, access to cash via ATMs. Those ATMs have to be based outside the gaming venue, where the number of spins per minute is limited, where the value of the bet type is limited and where a player has to pre-register and, once they reach a certain time limit, move on. They are, in a physical sense, related to gaming—those sorts of control in place to help to minimise problem gambling—but I am not aware of them having been applied to any online gaming.

Roy Ramm:  We have been talking to our colleagues in the remote sector, and one of the reasons why we would really like to have some remote gambling terminals in casinos is precisely so that we can look at the measures that are being applied online, compare them with what we are doing physically in casinos and see the reaction of players on gaming machines and on the online product. I think that those two elements of the industry have to come together to evolve proper player-protection measures.

85 Clive Efford: I have one more question, on pre-watershed advertising. Perhaps, Mr Lamb, your members have concerns about the image that that is promoting of their sports. The way advertising around sports events, particularly football, has evolved means they are now saturated with these adverts, which perhaps does not give the right image of the sport. Do any of your members have concerns about that?

Tim Lamb:  I can understand that. I think it is a question of balance. We have to appreciate that the revenues that are generated do benefit sport indirectly. It does help, in terms of commercial relationships between betting organisations and sports authorities. Betting is a very important, integral part of sport when it is properly regulated. It adds additional spice; it adds additional interest. Nobody is suggesting that we want to ban betting or ban advertising. I think vulnerable people need to be protected and there needs to be a balance, but I don’t think we are in the business of casting aspersions on the whole betting industry, because actually the relationship between betting and sport is a very important one and goes back a very long time.

Paul Scotney:  There is some frustration with some of the advertising campaigns of companies that are not contributing at the moment, which I think this Bill will take care of, and with some of those companies that do not share information with sports governing bodies on corruption issues.

86 Mr Leech: Mr Ramm, if casinos are allowed to offer remote gambling services in the buildings, what impact should that have on the level of taxation that would then be paid on those remote services, as opposed to the offline services?

Roy Ramm:  We would expect to pay the same level of taxation as the online operators were paying outside the casinos. We have additional burdens of taxation on our other gambling products. Our highest rate of taxation is 50%. We are currently paying a blended rate of taxation of 30%. I guess that if players were playing online, the taxation rate that applied outside the casino should apply inside the casino.

87 Mr Leech: If there was a differential between the two tax rates, though, would it not be fair to assume that there may be a temptation for a member of the industry in effect to become an online gambling establishment in a building in order to save on tax?

Roy Ramm:  Absolutely. That’s a very fair suggestion, but I do think that it’s controlled by the number of machines in the premises and by the appetite of customers to play all kinds of games. The playing public will not necessarily totally gravitate towards a gaming device. You can look at what happened in Stratford when Aspers opened the first large casino in the UK. It was allowed 150 gaming machines, provided that it had 30 tables. It opened with those 30 tables. Very quickly, it has had to increase that to more than 50 tables. No matter what you put there, the gaming public will play what they want to play. No matter how hard we might push the online product—I absolutely see your point—I don’t think the gaming public are steerable in that way.

88 Mr Leech: I am talking about avoiding the temptation of trying to move on to online gambling if the tax rate made it beneficial to do so. Is that not an argument to say that if you got your way and you were allowed to provide online services, the tax rate would have to be the same?

Roy Ramm:  It may be, but it would be pretty tough on us, in that we are providing the building and staff. We have all the additional overheads that, frankly, the online boys operating offshore do not have, plus the added layer of player protection that we are trying to put in and fund. If we were then to be penalised and pay a higher rate of tax, that would be quite a tough pill to swallow, but I do accept your point.

John Leech: I was arguing that if you were to get your way and be allowed to provide online services, that would be justifiable only if the online tax rate was the same as the offline tax rate overall.

Hywel Williams: If hon. Members have no further questions for the witnesses, I thank the witnesses on behalf of the Committee. The Committee will sit again to take further evidence on the Bill at 2.30 this afternoon, not 2 pm.

Ordered, That further consideration be now adjourned. —(Karen Bradley.)

Adjourned till this day at half-past Two o’clock.